Stock Option Trading Millionaire Concepts
Having been trading stocks and alternatives in the capital markets professionally throughout the years, I have actually seen numerous ups and downs.
I have actually seen paupers end up being millionaires overnight …
And
I have seen millionaires end up being paupers overnight …
One story told to me by my mentor is still etched in my mind:
"When, there were 2 Wall Street stock market multi-millionaires. Both were exceptionally successful and decided to share their insights with others by selling their stock exchange forecasts in newsletters. Each charged US$ 10,000 for their opinions. One trader was so curious to understand their views that he invested all of his $20,000 cost savings to buy both their viewpoints. His pals were naturally excited about what the two masters needed to state about the stock exchange`s direction. When they asked their good friend, he was fuming mad. Baffled, they asked their pal about his anger. He said, `One said BULLISH and the other said BEARISH!`."
The point of this illustration is that it was the trader who was wrong. In today`s stock and option market, individuals can have different opinions of future market direction and still earnings. The distinctions lay in the stock selecting or alternatives technique and in the mental attitude and discipline one utilizes in implementing that strategy.
I share here the fundamental stock and choice trading concepts I follow. By holding these principles securely in your mind, they will guide you regularly to profitability. These concepts will assist you reduce your danger and permit you to assess both what you are doing right and what you might be doing wrong.
You may have read ideas similar to these before. I and others use them due to the fact that they work. And if you memorize and review these concepts, your mind can utilize them to assist you in your stock and options trading.
CONCEPT 1.
SIMPLENESS IS MASTERY.
Wendy Kirkland
I learned this from Option Trading in Your Spare Time, When you feel that the stock and alternatives trading technique that you are following is too complex even for simple understanding, it is most likely not the very best.
In all elements of successful stock and alternatives trading, the most basic techniques often emerge victorious. In the heat of a trade, it is simple for our brains to become emotionally strained. If we have a complex method, we can not keep up with the action. Easier is much better.
PRINCIPLE 2.
NOBODY IS OBJECTIVE ENOUGH.
If you feel that you have absolute control over your feelings and can be objective in the heat of a stock or options trade, you are either a harmful types or you are an inexperienced trader.
No trader can be definitely objective, especially when market action is uncommon or extremely irregular. Just like the ideal storm can still shake the nerves of the most experienced sailors, the perfect stock exchange storm can still unnerve and sink a trader extremely rapidly. For that reason, one should strive to automate as many critical elements of your strategy as possible, particularly your profit-taking and stop-loss points.
CONCEPT 3.
HOLD ON TO YOUR GAINS AND CUT YOUR LOSSES.
This is the most crucial concept.
The majority of stock and alternatives traders do the opposite …
They hold on to their losses way too long and enjoy their equity sink and sink and sink, or they get out of their gains too soon only to see the rate increase and up and up. Over time, their gains never ever cover their losses.
This principle requires time to master effectively. Contemplate this principle and evaluate your previous stock and alternatives trades. If you have been unrestrained, you will see its reality.
CONCEPT 4.
HESITATE TO LOSE CASH.
Are you like most beginners who can`t wait to jump right into the stock and options market with your cash wishing to trade as soon as possible?
On this point, I have actually found that many unprincipled traders are more scared of losing out on "the next huge trade" than they are afraid of losing money! The key here is STICK TO YOUR STRATEGY! Take stock and alternatives trades when your strategy signals to do so and avoid taking trades when the conditions are not fulfilled. Exit trades when your method says to do so and leave them alone when the exit conditions are not in place.
The point here is to be scared to discard your money since you traded needlessly and without following your stock and choices strategy.
PRINCIPLE 5.
YOUR NEXT TRADE COULD BE A LOSING TRADE.
Do you absolutely think that your next stock or choices trade is going to be such a huge winner that you break your own finance guidelines and put in whatever you have? Do you remember what generally happens after that? It isn`t pretty, is it?
No matter how positive you might be when entering a trade, the stock and choices market has a method of doing the unexpected. For that reason, always stick to your portfolio management system. Do not compound your expected wins because you may wind up intensifying your extremely real losses.
CONCEPT 6.
DETERMINE YOUR EMOTIONAL CAPABILITY BEFORE INCREASING CAPITAL OUTLAY.
You understand by now how different paper trading and genuine stock and alternatives trading is, do not you?
In the very same way, after you get used to trading real money regularly, you find it very different when you increase your capital by ten fold, do not you?
What, then, is the difference? The distinction is in the psychological concern that comes with the possibility of losing a growing number of real cash. This happens when you cross from paper trading to genuine trading and also when you increase your capital after some successes.
After a while, a lot of traders realize their optimal capability in both dollars and emotion. Are you comfy trading up to a couple of thousand or tens of thousands or hundreds of thousands? Know your capability prior to dedicating the funds.
CONCEPT 7.
YOU ARE An AMATEUR AT EVERY TRADE.
Ever felt like a specialist after a couple of wins and after that lose a lot on the next stock or choices trade?
Overconfidence and the incorrect sense of invincibility based on previous wins is a dish for disaster. All specialists appreciate their next trade and go through all the correct steps of their stock or choices strategy before entry. Treat every trade as the very first trade you have ever made in your life. Never ever differ your stock or choices strategy. Never.
PRINCIPLE 8.
YOU ARE YOUR FORMULA TO SUCCESS OR FAILURE.
Ever followed an effective stock or options technique just to fail terribly?
You are the one who determines whether a strategy succeeds or fails. Your character and your discipline make or break the technique that you use not vice versa. Like Robert Kiyosaki says, "The investor is the asset or the liability, not the investment."
Understanding yourself initially will lead to eventual success.
PRINCIPLE 9.
CONSISTENCY.
Have you ever altered your mind about how to carry out a method? When you make changes day after day, you end up catching nothing but the wind.
Stock exchange variations have more variables than can be mathematically formulated. By following a tested method, we are assured that somebody successful has stacked the chances in our favour. When you review both winning and losing trades, determine whether the entry, management, and exit met every requirements in the strategy and whether you have actually followed it precisely before changing anything.
In conclusion …
I hope these basic guidelines that have led my ship of the harshest of seas and into the best harvests of my life will assist you too. Good Luck.
